SINGAPORE. — Currencies whipsawed on Thursday as news suggesting division, then detente in Sino-US trade talks sparked volatility, with riskier Asian currencies ultimately rallying over a sinking dollar.
Investors, parsing headlines for any clues that tensions weighing on global growth could be resolved, turned from downcast to bullish after Bloomberg reported a currency pact could be part of a deal suspending further tariff hikes.
China’s yuan, the most sensitive currency to the trade war, bounced to a two-week high from a month-low in offshore trade, gaining 0.3 percent by mid-session and pulling the trade-exposed Australian and New Zealand dollars up with it.
The safe-haven Japanese yen, which had first jumped on a gloomy report in the South China Morning Post suggesting US-China talks in Washington were headed for stalemate, gave up its gains to trade flat on the dollar at 107.46.
“There are many headlines flying about, some negative, and some positive,” said Stuart Oakley, global head of flow FX at Nomura in Singapore.
“The bottom line is we will have the clarity on how this has gone at midnight Tuesday (in Washington) as that is when we’ll know if the next round of tariffs have been imposed or delayed,” he said.
“The USD/CNY fix will be key to watch over the next 4-5 sessions. It’s been pegged around 7.0730 for several weeks. A move away from that level will give us a clear signal as to how the trade negotiations have gone.”
The United States is set to hike the tariff rate on $250 billion worth of Chinese goods to 30 percent from 25 percent next Tuesday.
Markets have for weeks gyrated as the likelihood of a breakthrough at the talks has waxed and waned while signs of the toll that the Sino-US trade dispute is taking on the global economy have growth in strength and number.
That played out in microcosm in volatile trade on Thursday.
Safe-haven currencies at first rallied after the SCMP, citing unnamed sources familiar with the discussions, said no progress was made on key issues and China’s lead negotiator, Vice Premier Liu He, planned leaving Washington a day early.
Sentiment turned neutral after a White House spokesman told CNBC he was unaware of any plans for Liu to leave early.
Then it turned positive, and the yen began falling, after the Bloomberg report and a New York Times story suggesting a possible reprieve on US restrictions on Chinese technology giant Huawei. – Reuters